What OEM means?

One of the most common terms we hear in the hardware markets these days,when we go to buy optical drives,memory cards or anything remotely linked to a microchip.Its a common question for the vendor or reseller to ask you, “oem or original?”,and most of just shrug,because we don’t know the difference.

So whats all this talk about,what oem means is-put plainly,it stands for “original equipment manufacturer”,but you then think, how different is that from the original,and the answer isnt miles apart.

Briefly spoken about in my previous post on import from China,most big corporations find it easier and cheaper to outsource production to third world countries,most noticeably china.For example if apple wants 10 million pieces of the  the new Ipad 2 produced in 6 months time,they’ll get estimates/quotations from a few hundred third party manufacturers in China.Finally a production company is  chosen based on their quality aspects and cost price. This company that wins the contract is the “OEM”. They will mass produce the Ipad 2 and simply print “APPLE” on the front,and of course on the brochures and supplementary cables.The OEM will even produce a few thousand extra and sell them to traders,but this time without the APPLE logo,but in every way the same Ipad2,this is how we see copies of high end mobile phones in the grey market that look just the same,but at half the price.

In simpler words, its outsoucing at its best.The USA  outsources services
 from  India,they outsource our “speech”,and general communication skills,for China they outsource manual labor.

In addition the reason for outsourcing, other than cheap labour,is so that the outsourcing company can focus on areas like marketing of their product,development of new products and in general reduction in operating costs,because it saves them the capital expenditure of procuring the  equipment.For example,a tiny little microchip to be produced, that we discard when not working and easily replace by a new “IC” like its commonly called, requires the implementation of  about 11 automated, mechanized control line tools.(Post-‘chips & wafers)Needless to say,each of these have to be monitored by maintained by many more people,so the final tally is enormous.

In todays markets,this not only applies to electronic goods,China,Hongkong and Taiwan have mastered the model of manufacture to a whole new level,and as a  result,the world turns to them to produce things anywhere from OEM Chocolates to OEM Wine!!

 

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2 Responses to What OEM means?

  1. diedre June 26, 2011 at 4:40 am #

    oem is the next best thing,most big companies see the future in this


  2. ray June 20, 2011 at 3:33 am #

    Hello ,,just a quick question,but does china or taiwan make cheaper OEM products?


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